NZDJPY turns to the bears

NZDJPY turns to the bears

By: James Ansher | Where To Trade | On:8-10-2014 12:48
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Key Highlights

  • Major Support and resistance levels
  • Analysis of the NZDJPY neckline break
  • Bearish Moving average on the monthly chart taking place
  • Conformation of a bearish trend pending

The multi-month NZDJYP uptrend seems to have ran out of steam. In the last 36 months, the pair has gained over 2000pips 500 of which it has given back in the last six months. From the monthly chart the current month has been preceded by three bearish candles and the bearish momentum seems to be picking up. The question on every traders mind is whether this is a temporary consolidation or this is a major reversal taking place.

 

Major support and resistance levels

Major support levels

  • The first major support is at 81.406 which is the low of February
  • The next significant support is the weekly S1 at 76.561
  • The third major support  within our scope is at 74.22 which is the low of June 2013

Major resistance levels

  • The closest resistance level is at 86.373 which is the high of April 2013
  • The next significant resistance is at 88.947 which is last month’s high
  • The third significant resistance within our scope is 91.623 which is the weekly R1

 

Technical analysis

Monthly chart

From the monthly chart, the 14 period moving average is now touching the candlestick prices. This indicates that the bullish momentum has subsided and the bears are gaining momentum. Should the Moving average cross the prices and start to trade above the candle stick we will have got confirmation that a long term bearish trend has picked up.

NZD/JPY Monthly 08-10-2014

The Stochastic reading at 17.55 has just dipped below the 20 mark indicating that we have entered an oversold territory. This is a bullish warning indicating that we may get some significant buying pressures at these levels.  The RSI has a reading of 56.17 which is a neutral signal.

 

Weekly Charts

From the weekly chart, the 14 period moving average has just made a bearish cross above the candlesticks. This indicates that a bearish momentum is at play. This cross also happened after the break of the head and shoulders pattern’s neckline which indicates that we should be anticipating the exchange rate to slide lower.

The Stochastic is giving a reading of 8.39. This indicates that we are at extreme oversold conditions. We can anticipate buying pressures at these levels. The RSI on the other hand, is giving a neutral signal at 38.20. Where To Trade - NZDJPY Weekly 08102014

Where To Trade - NZD/JPY Weekly 08-10-2014

 

Daily charts

From the daily charts, the 14 period moving average is trading well above the candlesticks. This indicates that the medium term bearish momentum has already picked up. We can thus expect the exchange rate to keep getting to lower lows.

The stochastic at a reading of 14.5, is giving an indication that we are at very oversold conditions.  We can thus anticipate further retracement. The RSI has a 32.58 reading which is a neutral indication.

Where To Trade - NZD/JPY Daily 08-10-2014

 

Wrap up

The bullish trend in the NZDJPY has definitely ceased. Momentum indicators point to the fact that we are about to start a bearish move. In the long term outlook, we should be waiting for the 14 period moving average to cross the prices completely in the monthly chart and a candle to close below it. This will give us the conformation we need of a bearish trend.

Under these conditions the best approach is to avoid taking any longer term trades until we get confirmation of the bearish momentum on the monthly chart. We anticipate a lot of false moves until the bearish move is well established.

James Ansher

James Ansher

When there is a will there is a trade

A successful Forex trader and expert advisor

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